House Bill 2578 was recently signed into law and will go into effect beginning July of 2015. Outlined below are parts of the new law that will likely impact the construction defect industry.
Right to Repair
The House Bill 2578 provides the seller, who receives a written notice of claims, a right to repair or replace any alleged defects after sending the purchaser a written notice of intent to repair. This right, however, is not an obligation to repair, however, the purchaser may not file a dwelling action until such intended repairs and replacements have been completed by the seller.
Under the new law, the work (to repair and replace) must begin within 35 days of the seller’s notice of intent to repair or replace. Although the seller is the one who selects the construction professional to perform the repairs, a purchaser has the opportunity to give consent to the selected professional. The consent, however, cannot be “unreasonably withheld” by the purchaser.
A purchaser has the opportunity to sue regarding the scope and the inadequacy of the repairs. In addition, under the new law, both of the parties’ conduct during the repair or replacement is later admissible in court.
It is worth noting that while a right to repair is not currently available under the Purchaser Dwelling Act, many builders include such provisions in the purchase contracts and the communities’ CC&Rs. Thus, this will not be the first time that purchasers have to face the right to repair in their construction defects claims.
The new law provides several new definitions. Most notably it defines a construction defect as follows: “a material deficiency in the design, construction, manufacture, repair, alteration, remodeling or landscaping of a dwelling that is the result of one of the following: a) a violation of construction codes applicable to the construction of the dwelling. b) the use of defective materials, products, components or equipment in the design, construction, manufacture, repair, alteration, remodeling or landscaping of the dwelling. c) the failure to adhere to generally accepted workmanship standards in the community.”
Further, the words contained within the definition of construction defect are defined as follows: “material deficiency “means “a deficiency that actually impairs the structural integrity, the functionality or the appearance of the dwelling at the time of the claim, or is reasonably likely to actually impair the structural integrity, the functionality or the appearance of the dwelling in the foreseeable future if not repaired or replaced.”
Lastly, a “seller” is defined to include “Construction Professionals”, which includes: “an architect, contractor, subcontractor, developer, builder, builder vendor, supplier, engineer or inspector performing or furnishing the design, supervision, inspection, construction or observation of the construction of any improvement to real property.”
These new definitions raise a number of questions. For example, is a violation of a building code, which was established to ensure the stability and functionality of a structure or dwelling, a “material deficiency”? It is also unclear as to how a material deficiency in “appearance” is going to be interpreted.
Attorneys Fees – Repealed
Under the current Purchaser Dwelling Actions statute, a “successful party” is entitled to attorney fees. The House Bill 2578 has removed this provision. Thus, attorney fees will not be available in negligence or implied warranty cases. However, the law does not change the availability of attorney fees to a successful party on a breach of contract and breach of express warranty. Lastly, purchasers will still have the ability to recover expert fees and taxable costs under Arizona Rules of Civil Procedure 68.
It is worth nothing that despite the common misconception that the Statute of Repose has been amended, the House Bill 2578 has not changed any part of the Statute of Repose, and thus the eight year time limitation in ARS §12-552 still remains.
The new law, amongst other things, has changed the way construction defect is defined, has added a right to repair, and repealed the attorney fees provision under the current law. The impact of this new law has yet to be seen, however, but once the initial interpretation hurdles have been surmounted, purchasers will be able to take advantage of the new definitions in bringing their claims against sellers.
Summary Written by Zara Torosyan